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Overview

On June 26, 2002, the Senate Finance Committee
approved TANF reauthorization legislation on a 13-8 vote. Three Republicans 
Senators Hatch (R-UT), Snowe (R-ME), and Murkowski (R-AK)  and Senator
Jeffords (I-VT) joined all of the Democrats on the Finance Committee, except
Senator Daschle (D-SD), in supporting the bill. The Finance Committees bill
is based on the provisions of the so-called Tri-partisan Agreement, a set of
changes to the TANF law agreed upon earlier this year by Senators Hatch, Snowe,
Jeffords, Breaux (D-LA), Lincoln (D-AR), and Rockefeller (D-WV).

This paper analyzes the Senate Finance Committee
bill. It finds:

The bill would require states to
increase the number of families engaged in welfare-to-work programs
substantially. States would be required to have 70 percent of their TANF
caseload in work activities in 2007 and have Individual Responsibility Plans
in place for all TANF parents and caretakers.

While the Senate Finance bill
would hold states accountable for much higher work targets than exist under
current law, the increased work requirements in the Senate bill are coupled
with expanded flexibility to provide welfare-to-work services that help
recipients find better-paying jobs and address barriers to employment. By
expanding state flexibility, the Senate Finance bill would allow states to
meet the increased work rates by building on and improving existing state
strategies to help parents prepare for, find and retain employment. In
contrast, the House bill would sharply limit the types of work
activities that states could utilize to meet the TANF laws work participation
rate requirements, forcing many states to dismantle successful welfare-to-work
programs now operating. By limiting types of activities that can count
toward the increased work participation requirements, the House-passed bill
effectively would mandate states to operate large workfare programs, despite
substantial evidence that such programs are ineffective at helping recipients
find jobs.

By expanding state
flexibility to design welfare-to-work programs and increasing child care
funding, the bill addresses many of the concerns raised by Governors and other
state officials about the work-related provisions in the Administrations
reauthorization proposal and the House-passed TANF bill that would reduce the
flexibility Congress granted to states in the 1996 welfare law.
Some 41 of 47 states responding to a survey by the National Governors
Association and the American Public Human Services Association earlier this
year stated that the Presidents proposal would cause them to make fundamental
changes to current welfare-to-work strategies and/or redirect resources away
from current efforts, particularly work supports for non-welfare families, in
order to fund new federal work-related mandates.

The Senate Finance bill gives states new options to provide
health care and TANF benefits to legal immigrants. The bill gives states
flexibility to provide health care benefits to legal immigrant pregnant women
and children, and TANF benefits to legal immigrants now barred from
participating in TANF-funded programs because they have been in the United
States for less than five years. Many states currently use their own state
funds to provide these benefits. The National Governors Association and the
National Conference of State Legislatures have called for this flexibility.

The House bill does not give states additional
options for providing benefits to legal immigrants.

The Senate Finance bill also gives states new options to
simplify child support procedures in ways that increase the amount of child
support that reaches children. The House bill includes more limited
improvements in this area. Estimates from the Congressional Budget Office
show that the Senate bill would result in a substantially larger increase in
the amount of child support reaching low-income children than the House bill.

The Senate Finance bill would extend Transitional Medical
Assistance (TMA) for five years while providing new state options to extend
the length of time families can qualify and to modify a set of TMA rules that
make the program difficult for states to administer and families to navigate.
The House bill extends TMA for only one year without providing any new options
to improve the program.

While the approach taken by the Senate Finance
Committee is a substantial improvement on the bill passed by the House earlier
this year, it has several limitations that should be addressed when it is
considered by the full Senate.

The Senate Finance bill freezes basic TANF funding at current
levels. The bill freezes basic TANF funding without adjusting its value
for inflation, so that by 2007, its purchasing power would fall almost 12
percent below its level in 2002 and 22 percent below its value in 1997. This
is particularly problematic in light of the latest TANF expenditure data from
the Department of Treasury which shows that states spent some $2 billion more
than the annual TANF block grant in FY 2001 by drawing on unspent funds from
prior years. Those funds have dwindled and most states can no longer rely on
them to augment their annual TANF block grant allocation. The combination of
the declining value of the TANF block grant, the lack of TANF reserve funds,
and increased costs due to the increased work-related requirements, will mean
that many states will have to make significant cuts in TANF-funded programs,
including programs that help support low-income working families. The bill
does include a small increase in TANF supplemental grants  supplemental grant
funding would increase by $122 million per year, or less than .7 percent of
the overall TANF block grant  which less than half the states would receive
under the bill.

The Senate Finance Committee bill includes only a modest
increase in child care funding. The bill provides $5.5 billion in
additional mandatory child care funding over the next five years as compared
to current child care funding. While these additional resources likely will
be adequate to meet the child care costs associated with the increased work
requirements included in the Senate Finance bill and compensate for the
effects of inflation, these funds will not be enough to make more than a small
dent in the number of low-income children who need child care assistance and
are eligible for subsidies, but do not receive them due to a lack of
resources. In fact, because some states may be forced to withdraw substantial
TANF funding from child care programs because of inadequate TANF
funding, in some states these new resources will not be sufficient to
forestall cuts in child care programs in some places.

The Senate Finance bill does not give states the option to
use federal TANF funds to provide wage subsidies to working families without
subjecting them to the same restrictions as non-working families receiving
TANF assistance. Recent research finds that wage subsidy programs 
programs that couple work requirements with financial incentives that
supplement the earnings of low-wage workers  have positive impacts on
employment, family income, and child well-being, including school achievement
and child behavior. The TANF time limit rules, however, make no
distinction between TANF-funded wage subsidies provided to a low-income
working family and a monthly welfare check provided to a family that is not
employed. As a result, some states have opted to use state funds,
instead of federal TANF funds, to provide wage subsidies. States should
be given the flexibility to determine whether to count TANF-funded wage
subsidies provided to low-income working families against the TANF time limit.

Recipients placed in rehabilitative services and certain
other activities designed to help them overcome barriers to employment could
count toward a states work rate, but only for a limited six-month period.
Under the bill, a recipient who participated in adult basic education, English
language acquisition programs classes, substance abuse treatment, or
rehabilitative services designed to address other barriers to employment
such as disabilities could count toward the work participation requirements
for up to six months. While this will be enough time for many recipients,
some recipients with severe physical or mental health impairments, very low
literacy skills, or substance abuse problems may need additional time in
programs designed to help them overcome such employment barriers. States
should be given flexibility to grant extensions to this six-month timeframe
when recipients with employment barriers need additional time to address these
barriers.

The Senate Finance bill includes only one modest provision to
reduce the extent to which families that want to comply with program
requirements but need additional help to do so are sanctioned rather than
being provided with needed services. The Senate Finance bill does include
a modest provision that would require states to review a familys Individual
Responsibility Plan prior to imposing a sanction on the family. While
helpful, without stronger language there is a risk that some states would
conduct only pro forma reviews instead of ensuring that families
circumstances are assessed adequately and needed services provided. In
addition, the bill does not include basic requirements on states to inform
families of why they are being sanctioned, to offer assistance in resolving
problems that may be impeding compliance with program rules, or to attempt to
contact and reengage those who have been sanctioned.

The Senate Finance bill adopts an approach to promoting
family formation that is likely to exclude efforts to help low-income
non-custodial parents meet their financial and parenting responsibilities.
The bill provides $1 billion over five years for Healthy Marriage Promotion
competitive grants. Unlike the House bill, which more narrowly would focus
its family formation-related funding to specified marriage services, the
Senate Finance bill would allow funds to be used for teen pregnancy and
domestic violence reduction efforts, and to replicate a demonstration program
 the Minnesota Family Investment Program  that increased marriage rates of
low-income parents. Neither the Senate Finance bill nor the House bill,
however, appropriate funds for programs to help low-income non-custodial
parents meet their responsibilities.